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TheStreet Open House

Best and Worst States for Small Business

WASHINGTON ( MainStreet) -- Which state is the most small-business friendly?

Factors such as taxes, regulatory costs, government spending, property rights, gas and diesel taxes, health care policies and energy costs play a large part in whether a business should locate in a certain state. The Small Business & Entrepreneurship Council takes these measures and ranks the 50 states and the District of Columbia annually based on their public policy climates for entrepreneurship.

"Low corporate and individual tax rates can make all the difference, especially for a small business that is just getting started," says Deborah Sweeney, CEO of MyCorporation, an online document preparation service for small businesses. "It may be difficult for a small business to get off the ground in the face of the difficult tax structures and the high cost of hiring employees."

The most recent Small Business Index Survival 2011, released in November, added six measures by which to rank states, making for a total of 44 major government-imposed or government-related costs factors that matter to small businesses and entrepreneurs.

While state tax policy and regulatory costs certainly weigh the most in the overall ranking of each state, given the country's economic climate the SBE Council decided to add state and local debt levels as well as the dependence on federal funding at the state and local level to provide a clearer picture of how friendly or unfriendly each state is for small business.

Another new measure included was state wireless taxes, something that will be particularly important given the amount of business now done online and through smartphones and tablets.

In a suggestion of another reason these factors matter: From 2000 to 2010 the top 25 states on the 2011 Index saw population growth of 13.4%, while in the bottom 26, population growth registered at just 6.3%, the report says.

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